- POSTED: 19 Jun 2014 07:01
- UPDATED: 19 Jun 2014 07:02
A US judge rebuked Argentina on Wednesday for seeking to evade an order to make good on its debts and for labelling hedge funds who hold the country's bonds "extortionists".
NEW YORK: A US judge rebuked Argentina on Wednesday for seeking to evade an order to make good on its debts and for labelling hedge funds who hold the country's bonds "extortionists".
In 2012, Judge Thomas Griesa ordered Argentina to pay the hedge funds and this week the Supreme Court declined to re-examine his position, infuriating Argentina.
Griesa called President Cristina Kirchner's apparent plan to avoid paying illegal.
Kirchner said late on Monday that the country could not pay the hedge funds, who refused to join a restructuring of the country's debt and want to be paid the full $1.3 billion face value of the bonds they hold.
"Argentina has shown a more than clear will to pay, but there is a difference between negotiation and extortion," Kirchner said after the Supreme Court decision.
The judge called her speech "unfortunate."
"Now that really does not give me confidence in a good faith commitment to pay all the obligations of the Republic," he said.
Responding to a request by NML Capital and other hedge funds that sued Argentina for payment, Griesa lifted a stay, or freeze, on his court order last year for the country to pay up.
The stay had been in place while the parties waited to see if the Supreme Court would accept Argentina's appeal for it to review the case.
But the court turned the appeal back, and by lifting the stay on Wednesday, Griesa started the debt clock ticking.
Argentina is scheduled to make debt payments by June 30, to both holders of the restructured debt and now the hedge funds. If it does not pay, a 30-day grace period gives it until the end of July before it will be seen as in default again.
Lawyers for the country told the court a team would travel to New York next week to hold talks with the hedge funds.
Robert Cohen, representing NML, said they are "happy to talk."
"In six weeks, much bigger problems have been solved. We're prepared to sit with them."
- Concern over stalling -
But Griesa made clear he was worried new negotiations were just another attempt by Argentina to stall, in a case that dates back more than a decade.
"You can talk about negotiations. But I believe there has to be a legal mechanism to prevent what I'm talking about, because we do not want another charade."
'What has the Republic done for the last dozen years? It has ignored those judgments, and that is of concern to me."
Argentina has been fighting NML and other so-called "holdouts" for years, after they refused to take part in a restructuring of the nearly $100 billion in debt Argentina defaulted on in 2001.
More than 92 per cent of bondholders took part in the 2005 and 2010 restructurings, in which they took massive write-downs of their bonds' value to help the government rebuild its finances.
But the hedge funds, which Buenos Aires brands "vultures," scooped up the debt on the market at huge discounts when the country fell into default, and have since pursued full payment in courts in New York, where the bonds were issued.
Griesa and Cohen said they wanted more information about Argentina's apparent plan to evade payment on the hedge fund bonds by transferring the restructured or "exchange" bonds to Argentine jurisdiction, under Argentine law, via a new bond swap.
The aim would be to avoid the US court's order that the US banks and settlement agencies which handle the country's debt payments cannot pay the restructured bonds without also paying the holdouts in full.
Griesa clearly warned the banks not to take part in any tactic by Argentina to avoid paying the holdouts.
"There can be no payment to the exchanges (exchange bonds) unless there is a payment to NML. And if anyone undertakes to make a payment to the exchanges, without making sure of a payment to NML, they are in violation of this court order."